PBGC v. LTV Corp.
Citation and Court
496 U.S. 633 (1990), Supreme Court of the United States
Facts
LTV Corporation filed for bankruptcy and its three pension plans were terminated and assumed by the Pension Benefit Guaranty Corporation (PBGC). LTV later began paying enhanced “follow-on” benefits to retirees out of its own funds. The PBGC then decided to restore the pension plans to LTV, reasoning that LTV’s follow-on benefits effectively re-created the plans. LTV challenged the restoration as arbitrary and capricious.
Issue
Whether the PBGC’s decision to restore terminated pension plans to LTV was arbitrary and capricious under the APA, and whether the PBGC’s failure to consider all relevant factors invalidated the restoration.
Holding
The PBGC’s restoration decision was not arbitrary and capricious; the agency adequately considered the factors Congress intended it to weigh, including the moral hazard concern that companies would shed pension obligations through bankruptcy while maintaining equivalent benefits through other channels.
Rule / Doctrine
Under APA arbitrary and capricious review, courts examine whether the agency considered the factors Congress intended and whether its decision is rationally connected to the facts before it. An agency may consider factors — such as deterrence of moral hazard — that are not explicitly listed in the statute if they reflect an intelligible connection to the statutory purpose.
Significance
PBGC v. LTV is a frequently cited example of how courts apply arbitrary and capricious review deferentially to complex agency decisions implicating pension law, bankruptcy, and labor policy. It reinforces the principle that the reviewing court may not substitute its judgment for the agency’s on policy grounds.